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Hudson pools more non-QM loans in $367M deal

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Hudson Americas is pooling its next aggregation of non-qualified, high-balance mortgage acquisitions in a new securitization exposed to a large share of borrowers who have sought or are already receiving pandemic-related forbearance or deferral on payments.

But so far, less than half of those granted the allowance are yet to skip any payments, according to ratings agency reports.

The $363.17 million COLT 2020-2 Mortgage Loan Trust will pool 627 loans with average balances of $579,217. While the loans are primarily underwritten to prime borrowers (with an average FICO of 717) with significant equity, approximately 66% of the loans are considered “non-QM” under Consumer Federal Protection Bureau guidelines on ability-to-repay rules.

The loans were originated by Caliber, HomeXpress Mortgage Corp. and other third-party lenders. The loans were aggregated by Hudson Americas, a subsidiary of global asset manager Hudson Advisors that providing underwriting and investment services to private equity firm Lone Star Funds.

Of the loans in the pool, approximately 22% are to borrowers that have requested forbearance under COVID-19 payment relieve plans; “roughly” 52% have continued to make monthly payments, however, according to Fitch Ratings. Another 1.6% of the pool are borrowers currently part of a deferral plan.

The large share of borrowers in forbearance programs still paying regular monthly payments “is a trend that has been observed across the industry thus far” during the coronavirus outbreak, according to Fitch’s report.

Caliber will market most of the deal through a $274.37 million Class A1 tranche with preliminary AAA ratings from Fitch.

Like other non-QM issuers sponsoring deals in the current pandemic environment, Caliber has shifted to a sequential pay structure that will prioritize principal payments to senior notes classes (Class A1, A2 and A3) until those tranches are paid in full.

This provides more beneficial support to the AAA-rated notes, which allows Caliber to maintain the nearly 24% credit enhancement benefit to the senior notes it has carried in prior securitizations.

Nomura Securities is leading the deal.

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